IE GMBA application

What do you believe are the greatest challenges facing the sector or industry you would like to specialize in at IE? What role

do you hope to be able to play in this sector or industry in the medium term?

by Kamen Georgiev

Agenda

• Telecommunication industry• Mobile sector• Challenges• Opportunities

• Internet Service Providers• Challenges• Opportunities

• My role

Mobile sector challenges - PRICE

One company’s churn is another company’s growth. But with mobile penetration nearing saturation and:

• Highly competitive market• Low ARPU (Average Rate Per User)• Regulatory pressure that drives the

Revenue/EBITDA down• Decrease in mobile termination rates• EU to end mobile roaming in 2017

How will the Mobile sector continue to thrive ?

Mobile sector challenges – Bandwidth/Capacity

•Mobile operators implement new generation networks every 5-6 years – from 2G to 3G in 2005 and from 3G to LTE in 2012•LTE development is a must in order to meet the constant increase of bandwidth/capacity demand•LTE subscribers are expected to outgrow the traditional 2G/3G users by 2020•Constant CAPEX needs – additional acquisition of frequencies, new network/hardware deployments

• The mobile sector is a CAPEX intensive business. Between 15-20% of the annual Revenue is reinvested in the network

• The trend is expected to continue with CAPEX increase of 4% to $360 billion worldwide in 2015

Mobile sector challenges - CAPEX

Mobile sector challenges – Commoditization of services

Where did the minutes go ?

•Skype/Viber vs Mobile calls•WhatsApp vs SMS•Traditional TV vs OTT (over the top, i.e. NetFlix)

Mobile operators will have to face a further decrease of Revenue from

traditional services.

How will they justify the constant need of new investments ?

Mobile sector opportunities – Infrastructure sharing/Consolidation

• After several years of fierce competition, declining revenues, and increasing broadband demand Mobile operators realized the benefits of infrastructure sharing

• One time investment – one shared network – multiple operators -> CAPEX savings

• M&A (Mergers and Acquisitions) is the logical next step in the process • America Movil acquired 50,8% of the shares of Telekom Austria in Q3

2014 thus diversifying their business with presence in Europe

Mobile sector opportunities – All IP

• Migrating from switch-based networks (2G/3G) to LTE, from copper wireline (xDSL) to optical (FTTx) will allow the operators to provide all services over IP (Internet Protocol).• Tim Höttges, chief executive of Deutsche Telekom reported that they are migrating 100,000

customers a week to their internet-based platform.

• Mobile operators shift to the converged market by offering bundle services - mobile, fixed voice, Internet and IPTV. They enhance innovation and provide customers with new competitive choices thus increasing customer satisfaction and brand loyalty and boosting their revenues and profitability.• In Q3 2013 Vodafone bought the biggest cable operator in Germany – Cable Deutschland thus

making its first move into consumer broadband and television.• In Q2 2015 AT&T acquired DirecTV in the US which enables AT&T to add more bundled

packages to their portfolio making it a fundamentally different company with a diversified set of capabilities and businesses.

• IP networks provide the base ground for the development of cloud services.

Mobile sector opportunities – New revenue structure

• The penetration of smartphones will completely change the mobile operators revenue structure

• Value added services (VAS), i.e. Cloud services to become a major revenue stream

Mobile sector opportunities – Current cloud services

• Application stores• Vodafone 360 (social computing that combines contact lists with friends

locations ), Orange market, etc.

• Storage• AT&T Address book (synchronizes contacts), AT&T Mobile Share (access

to photos/videos from any device), Deutsche Telekom (cloud storage)

• SaaS (Software as a service)• Telefonica offers Microsoft 365 and McAfee antivirus software in a

bundle with their broadband and hosting solutions

• Online store• Instant activation of value-added service, i.e. minutes/SMS/Data

packages, data roaming, TV bundles etc.

Mobile sector opportunities – Cloud benefits

• Leverage customer data – Customize and expose applications to the right customer segment (profiling information)

• Offer end-to-end services – Protect from third party content providers to capitalize the customer base

• Economy of scale - New products and services can be developed in the cloud before rolling out to specific markets and adjusted for local needs

• Faster service delivery – IPTV service can be activated over the existing Internet line instantly rather than waiting several days for a technician to install a new cable.

• Flexibility - Pay per use model, i.e. OTT platforms, VoD (video on demand)

Mobile sector Future opportunities

• Mobile Financial Services • Mobile wallets - The near-field

communication (NFC) technology enables mobile phones to transmit payment information.

• Location Based Service • Mobile advertising• Mobile Music• IoT (Internet of Things)

• Smart home – automation and distance management

• Telemedicine – Healthcare at a distance• Smart metering (gas, water, electricity)• Connected Car - access navigation,

Internet, roadside assistance • Sensor technology

Internet Service Provider sector – Overview

• The telecommunications industry has never before faced so many challenges and so many opportunities.

• Likewise the Mobile operators the ISPs face the same problems – high competition, price erosion, constant increase of capacity demands, CAPEX needs, commoditization of services

• ISPs have to turn the negative annual revenue growth trend. But how?

Internet Service Provider Challenges – IP Transit Prices

50%-80% price decrease per Mbps for the last 5 years

The total IP transit market is forecasted to shrink with 40% to

$3.3 billion in 2020

Internet Service Providers Challenges – Transport Capacity growth

• ISPs face difficulties to handle the bandwidth demands.• This drives content providers to build their own private networks,

thus cannibalizing the ISP transport capacity business.• Facebook, Amazon, Google and Microsoft invested in sub-marine cable

systems, inter-city and metro optical networks

Internet Service Providers Challenges – Transport Capacity Price

• The threat from content providers is further increased by the constant decrease of transport capacity prices.

• The CAGR of a 10Gbps transport capacity is between -15% and -25% for the last 3 years and will continue at the same rate

Internet Service Providers Opportunities -Colocation

• The constant increase of Internet users, online content and broadband penetration is driving the colocation demand exponentially.

• The colocation market is forecasted to grow at a compound annual growth rate of 15% over the period 2014-2020.

• ISPs started to invest in colocation facilities to strengthen their product portfolio.• NTT communications bought the biggest German datacenter operator E-Shelter in 2015

And more importantly Demand > Supply

drives the prices up

Internet Service Providers Opportunities -from Wholesale to Enterprise

• ISPs operators can benefit from turning their focus on the Enterprise segment where • Demand for Managed service is growing• Companies are optimizing their business by outsourcing IT related activities • The migration to cloud is tremendous• IT Security is becoming a key factor• Margins are high !

Internet Service Providers Opportunities -BIG DATA

Big data promises to promote growth, increase efficiency and profitability by collecting, managing, and analyzing in real time the vast increase in both structured and unstructured data

Being able to combine predictive analytics with real-time data can

• Retain or bring new customers• Create a holistic customer profile• Offer relevant customer experience • Monetize big date know-how by

selling it as a service to other companies

From ISP to Integrated Telco Operator

• ISPs need to diversify their service portfolio by adding new services and focusing on enterprise market.

• ICT (Information and Communication Technology) as a Service is a concept that can drive innovation and boost profitability.

My role in the Telco sector

• After the “fixed Internet wave” that created over 1 billion users in the 1990s and the “mobile Internet wave” that connected an additional 2 billion users in the 2000s, the IoT is expected to be the next wave with a potential to connect as many as 28 billion of “things” by 2020.

• I look forward to being a part of the next revolution in which IoT will inevitably link together all segments in the Telco industry such that:

• Mobile networks will be the backbone of IoT

• Cloud/BIG date providers will be the brain of IoT

• Colocation/ISP will provide scalability of IoT

My role in the Telco sector

• Within the next few years, I hope to develop my potential on two major levels

• General Management - Develop a broader understanding of the business and acquire skills needed to be a successful cross-functional executive

• Entrepreneurship – Embrace the opportunities to create new products, services and markets through the IoT applications

Used resources

http://www.bmiresearch.com/www.telegeography.comwww.ft.comhttp://www.itbusinessedge.comhttp://www.datacenterknowledge.com/http://www.infinera.comhttp://www.microsoft.com